There are a lot of different scenarios and
Firstly, £1000 is not worth arguing over in
court because he will not get his legal costs back even he wins.
If you have his bank details, you can always
simply send his £1000 back.
You can send him a cheque and see if he says
he wants the shares instead.
However, there was clearly an agreement for
him to buy shares in the company and he paid you the money in that respect. So,
whilst he may not yet have the shares, I think you are contract actually bound
to let him have them.
If you do not, you are in breach of contract.
If you are in breach of contract he is
entitled to damages/compensation. To get damages/compensation. He has two of
At this stage, the business is not trading
and therefore makes no profit and the chances are that the shares would be
worth less than £1000.
At this stage, I think the maximum he could
argue that he is lost as a result of your breach of contract is £1000.
However, you need to be aware of what rights
he has as a shareholder.
He is entitled to dividends and share of
profits. Of all the company income goes to pay director's salary (yours) then
there will never be any profit and there will never be any dividend and whilst
he may own a substantial percentage of the company, it will never be worth
anything unless in years to come, it floats on the stock exchange or suchlike.
The other thing, the last thing an investor
wants to do, is being business with someone who does not want them.
If he were asking me the same question, I
would telling to take the thousand pounds and walk away.
You can issue more shares. But you have to
offer them to him in the same proportion that you and him own now and it would
mean him buying more in order to keep his percentage.
The company has not traded and therefore
there is no conflict (that would be financially worth arguing over) if you set
of another company doing the same thing.
To be honest, I would be inclined to send a
cheque for his thousand pounds, Mark the letter without prejudice save as to
costs, and tell him that you have simply changed your mind, and there is his
money back. If he feels differently, he should take you to court.
If he does, you will have to defend his
proceedings. Remember that even if he wins, he will only get back what he has
lost which at this stage is not a lot and he will not get his legal costs paid.
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